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Equinix (EQIX) Q1 FFO & Revenues Surpass Estimates, View Up

Zacks Equity Research

Equinix Inc. EQIX posted better-than-expected results for first-quarter 2019, wherein the bottom line and revenues surpassed the Zacks Consensus Estimate. Both adjusted funds from operations (AFFO) and revenues improved year over year as well.

The company’s AFFO per share came in at $5.95, beating the Zacks Consensus Estimate of $5.60. The figure also improved from the year-ago quarter’s reported tally of $5.21. This upside primarily stemmed from robust top-line growth and solid operating performance, partially offset by an elevated cost of revenues.

Quarter in Detail

Total revenues came in at $1.36 billion, outpacing the Zacks Consensus Estimate of $1.35 billion, and up 12% year over year. Encouragingly, this also marks the 65th quarter of consecutive revenue growth for the company.

Recurring revenues came in at around $1.27 billion, up approximately 3.3% from the year-ago tally. Non-recurring revenues climbed 10.8% to nearly $88.4 million.

Revenues from the three geographic regions increased on a year-over-year basis as well. Revenues from the Americas, EMEA and the Asia Pacific jumped 7%, 14.5% and 21.6% to $644.4 million, $434.7 million and $284.2 million, respectively.

Cash gross margin was 67%, flat year over year. Total operating expenses flared up around 9% to $401.7 million year over year.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $660.2 million, up 14% year over year. Adjusted EBITDA margins came in at 48% flat year over year. AFFO appreciated 17.7% sequentially to $488.1 million during the Mar-end quarter.

Balance Sheet

Equinix exited the first quarter with cash and cash equivalents of nearly $1.6 billion. The company’s total debt principal outstanding was $11 billion as of Dec 31, 2019.

Dividend Update

Concurrent with its first-quarter 2019 earnings release, on May 1, Equinix’s board of directors approved a quarterly cash dividend of $2.46 per share. The dividend will be paid on Jun 19, to shareholders of record on May 22, 2019.

Guidance

Equinix has updated its outlook for the first quarter and full-year 2019.

For 2019, the company estimates generating revenues of $5.545-$5.595 billion. The company predicts adjusted EBITDA of $2.64-$2.68 billion. Equinix anticipates full-year 2019 AFFO in the $1.880-$1.910 billion range, up from the earlier estimate of $1.825-$1.875 billion.

Coming to the current quarter, Equinix projects revenues of $1.381-$1.391 billion. Adjusted EBITDA is likely to lie between $649 million and $659 million.

Our Take

In the March-end quarter, Equinix continued to witness growth in interconnection revenues. In fact, with interconnections increasing to more than more than 341,000, interconnection revenues surpassed colocation revenues in the quarter.

Equinix, Inc. Price and EPS Surprise
 

Equinix, Inc. Price and EPS Surprise | Equinix, Inc. Quote

Nevertheless, rising debt burden and intensifying competition from established Internet data-center operators remain concerns for Equinix.

Equinix carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Cousins Properties Incorporated CUZ reported FFO per share of 20 cents in the January-March quarter, in line with the Zacks Consensus Estimate. The figure came in higher than the prior-year reported tally of 15 cents. 

Duke Realty Corporation’s DRE first-quarter 2019 core FFO per share of 33 cents surpassed the Zacks Consensus Estimate of 32 cents. Moreover, the figure came in ahead of the year-ago quarter’s reported tally of 30 cents.

Ventas, Inc. VTR delivered first-quarter normalized FFO of 99 cents, beating the Zacks Consensus Estimate of 96 cents. The reported figure, however, came in lower than the prior year’s $1.05.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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